THE Reserve Bank of Australia this week released the magic number of how much property growth is needed for it to make sense to buy rather than rent.

On a national front the RBA have calculated home prices around Australia have risen an estimated 2.4 per cent a year, after adjustments for inflation and ownership costs, over the past 60 years — and that house prices would need to gain 2.9 per cent per year to provide a better option than renting.

However a range of property industry experts have noted the RBA’s estimates, which account for the national housing market, could fall below those being achieved in some cities and postcodes.

This is particular the case in Sydney and Melbourne.

The authors of the RBA’s Is Housing Overvalued report, Ryan Fox and Peter Tulip, concluded in their report that:

“Many observers have suggested that future house price growth is likely to be somewhat less than this historic average. In that case, at current prices, rents, interest rates and so on, the average household is probably financially better off renting than buying.”

Cameron Kusher, senior analyst for RP Data, estimated suburbs that had achieved annual growth in excess of about 5.5 per cent over the past 10 years would likely have outpaced inflation and have provided a better option to buy rather than rent.

Among the nations biggest property markets Sydney did not achieve that growth as a whole with the city’s 10 year annual growth median at 3.6 per cent according to RP Data stats.

Melbourne just edged in, at 5.6 per cent.

Brisbane houses were just outside of the range with 5.2 per cent annual growth over the past decade.

However he said many suburbs were likely to have beaten the RBA’s estimate.

“Realistically, most suburbs in Melbourne and Sydney have grown in excess of the (2.9 per cent) projection,” Mr Kusher said.

“Over the last 15 to 20 years we have definitely seen growth in excess of inflation most of the time.”

Mr Kusher noted it was important to ask whether that level of growth would be sustainable.

He said that with price growth expected to track household income growth in the future, they may fall behind on the inflation scale.

And such a change may mean prices do not continue to rise at recently seen levels, but he noted there was a further benefit to buying.

“It’s a new approach to the idea of buying or renting and I generally agree with what they (the RBA) are saying, but my view has always been that you can look at your mortgage as a way of forcing yourself to save,” Mr Kusher said.

“The people who don’t buy, they still need to put away a portion of their income.”

Paul Bird, spokesman for Realestateview.com.au, noted with inflation factored in, the most recent five-year growth for Sydney had been at 7.3 per cent, per year.

In Melbourne it was at 6.9 per cent, according to figures from the REIV’s propertydata.com.au.

Mr Bird said the outlook was also good.

“And the outlook is still solid and positive over the next six months given the indications that interest rates will remain on hold for the time being,” Mr Bird said.

“We expect to see ongoing strength in the market, particularly given the auction market in Melbourne over the next weeks is back up over the 600-700 range, which is well ahead of what it was last year which provided a very strong July and August.

“Given the growth we have seen over the last 12 months you would have to expect the market to be strong over the next three months as well. It would certainly be ahead of that (2.9 per cent) if not ahead of that in the next three months.”

A separate report from Aussie Home Loans released this week argued the median rental cost of an apartment in Sydney, which rose to $500 per week at the end of June, exceeds the cost of paying an average sized loan for the city.

Aussie calculated a $431.52 weekly repayment at their current lending rate of 4.84 per cent on an average, $355,000, loan.

Ian Corfield, Aussie Home Loans chief executive, said with interest rates low — the figures currently stacked up to buy.

“People who are in the rental trap should be now seriously considering ways of getting into the property market, while rates are so low and rents are showing continuing growth in the Sydney market,” Mr Corfield said.

He noted that this was particularly the case in Melbourne and Sydney where property growth had been historically stronger than other parts of the country.

“If you look at the markets Sydney and Melbourne are very much in that space and there are pockets of other states that are as well,” Mr Corfield said.

“Given the Reserve Bank has indicated that rates are not likely to change for some time, ultimately people are better off buying in these key markets right now.

“There are benefits of renting a house, but equally if people have the chance to have an asset at a price that allows them to put some money back into their pocket, then that’s going to be a great opportunity.”